An adult entrepreneur was sentenced to more than five years in prison and ordered to forfeit over an estimated $8.1 million in assets on Friday after pleading guilty to federal charges in connection with a income tax evasion scheme and one count of transporting obscenity.
John Kenneth Coil pled guilty in June of this year to mail fraud for mailing a fraudulent 1040 tax return as part of a scheme to defraud the IRS and to one count of transporting obscenity.
Coil orchestrated a complex tax evasion scheme involving family members and business associates that allowed Coil to avoid paying over $4.5 million dollars in taxes over a 20-year period.
Coil ran 27 adult retail stores via front companies Louisiana Development, Rex Temple, and Trinity Christians of America and hid properties from the IRS by placing them in the name of his children without their consent, and skimmed money from the stores without reporting it to the IRS.
The $8.1 million in assets, 30 pieces of realty and 20 adult video stores, that Coil must forfeit represents virtually all of his assets in Texas, the bulk of his adult retail empire. The forfeiture was part of his plea bargain.
Coil also pled guilty to an obscenity charge for transporting a hardcore German video entitled Nympho Bride across state lines, one of 15 obscenity charges that Coil was indicted for in September 2003.
The United States Attorney John Sutton played up the obscenity aspect of the case in a statement released by his office on Friday. “John Kenneth Coil has been a long time pornography merchant who has made millions selling obscenity and cheating on his taxes. He is finally on his way to federal prison for his crimes,” Sutton said. “American families have won a battle today in the fight against pornography. Today’s sentences should put those in the hard-core pornography business on notice that there will be a price to pay for violating our obscenity and tax laws.”
United States District Judge Harry Lee Hudspeth also ordered that Coil pay a $5,000 fine and that Coil be placed under supervised release for a period of three years after completing his prison term.
Hudspeth also sentenced Coil’s business partner, 48-year-old Charles Phelps, received 42 months in federal prison and a fine of $5,000 for conspiring to defraud the IRS.
Six other co-defendants in the case have already been sentenced for their roles in the scheme, including Coil’s wife, son, and daughter who each received three years probation.
The merchandise from at least eight of the stores was part of the forfeiture agreement, but the government has not revealed its plans for the adult merchandise.
